What is a good Return on Equity (ROE)?

Question

What is a good Return on Equity (ROE) for a company?

Answer 1

It depends on the industry and a number of other factors, but generally anything over 13% is terrific. Over 20% is outstanding. Also keep in mind that ROE can be manipulated through the use of debt.

Answer 2

It should be higher than your cost of capital, but it should be compared to its industry first. Also, take a close look at the company's books to ensure that its ROE is not directly influenced by being highly leverage. Also, make sure that a company isn't just using equity to raise capital as well. The company should use a healthy balance of debt and equity, as long as the debt is not excessive!

Answer 3

Asset turnover way earnings / property. So if earnings have been one hundred, and one hundred / property = one million.7, then property could be one hundred / one million.7, or fifty 8.8 internet revenues margin of three% on earnings of one hundred ought to be 3. If supplies entire fifty 8.8, so does Debt and fairness. A Debt ratio of 40 way fairness is one hundred, an entire of one hundred and 40. So fairness = one hundred / one hundred 40, or seventy one.4% of fifty 8.8, or fairness is 40 two. (And Debt is sixteen.8) ultimately, ROE = 3 / 40 two, or 7.one million% hence, we enable revenues equivalent one hundred, even nonetheless it could have been any sort. practice it via letting revenues equivalent 268, to illustrate. ROE will in spite of the undeniable fact that be 7.one million%.

Answer 4

It sort of depends on the industry but it should exceed the cost of capital. It also can be compared to other companies in the industry. You need something to compare it against.